Oil and natural gas prices rose sharply on Monday after BP (BP) said it would suspend all exports through the Red Sea due to increased attacks on merchant ships by Houthi fighters in Yemen.
The decision by one of the world’s largest oil companies follows similar moves by major shipping companies Analysts have warned that it could ripple through global supply chains and increase the costs of moving goods.
“Due to the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily suspend all traffic through the Red Sea,” the company said in a statement. “We will keep this precautionary suspension under constant review, subject to evolving conditions in the region.”
Oil posted steep gains on the news. Brent crude, the global benchmark, was up 2.7% at $78.68 a barrel as of 9:30 am. Even American oil A barrel rose 2.7% to $73.38.
The news also affected the natural gas market. Europe’s main natural gas prices rose more than 9% to €36 ($39.65) per megawatt hour. That’s still a fraction of the all-time high of €320 ($349.24) per megawatt hour seen in August 2022, at the height of the continent’s energy crisis.
Airstrikes by Iran-backed Houthis, who support Hamas and the Palestinian people, have become frequent since the start of the Israel-Hamas war. The organization said the attack was an act of revenge against Israel. The US and its allies are now considering expanding a maritime task force in the Red Sea to protect merchant ships.
The world’s largest container shipping companies have also suspended traffic along one of the world’s main trade arteries, a move experts say could disrupt supply chains and increase freight costs.
MSC, Maersk, CMA CGM and Hapag-Lloyd have all said in recent days that they are avoiding the Suez Canal for security reasons. Evergreen Group’s container shipping division joined that list on Monday, saying in a statement that it will suspend Israel’s import and export service “with immediate effect until further notice.”
On Friday, Houthi rebels claimed responsibility for attacks on two MSC ships.
“The situation continues to deteriorate and safety concerns are increasing,” French group CMA CGM said in a statement on Saturday, announcing that ships due to transit the Red Sea had been advised to suspend their voyages “until further notice”.
“CMA CGM is taking all necessary measures to protect its transportation services for its customers,” the company added.
But analysts have warned that a disruption to a key trade route between east and west could have knock-on effects on supply chains.
“Expect an increase in global freight rates, rerouting and longer transit times,” said Judah Levin, head of research at logistics firm Freedos.
Already, some ships are diverted via the Cape of Good Hope in Africa, adding up to three weeks to travel time and fuel costs.
“This means that a week of meaningful capacity restoration can have ripple effects for months after a few weeks of setbacks,” UPS analysts wrote in a note on Sunday, noting that about 30% of global container trade passes through the Suez Canal. .
If disruptions persist, shippers could “lock in higher prices than expected” as they renegotiate long-term connections in the coming days and weeks, analysts said.
This story has been updated with additional context and improvements.
Anna Kuban and Rob North contributed reporting.